session 19 - upstream o&g business development - domestic

8/10/2019 Session 19 - Upstream O&G Business Development - Domestic

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E&CLarsen & Toubro Limited CALD

Marketing & Business Development

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Title : Marketing and Business Development

(Domestic)

Faculty : N. K. Chandwani and Rupchand Lohana

Date : 29thAugust 2007

Venue : MFF Hazira

CALD Series II Technical

Offshore Upstream Oil & Gas Business Training Module

Objective of CALD: to update expertise in EPC

Organized by: E&C - HR


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Introduction

What essentially is Marketing in the EPC Business Context?

Different from Marketing in the conventional sense

Focus Markets, Products and Services:

Focus Market: Domestic Upstream Offshore Hydrocarbon Sector

Products: Offshore Platforms and Modules Services : Installation, Oil Field (Future)

Target Clients:

E&P Companies in India Other EPC Companies for fabrication of Modules


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Focus Market: Indian Offshore Region

Western Offshore consisting

of fields such as Bombay

High, Heera, Neelam, Panna,

Bassein, Tapti Fields

Eastern Offshore consisting

of fields such as the KG

Basin, Cauvery Basin, Deen

Dayal Field

INDIA

ONGC

Marginal

fields

MHN, MHS,

Vasai, Bassein

& Satellite,

Neelam, Heera,

Panna, Mukta,

Tapti fields

KG Basin

Gulf of

Cambay

Cauvery

Basin


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Understanding EPIC and LSTK

EPIC:

Engineering, Procurement, Installation and Commissioning

LSTK: Lumpsum Turnkey: Total Project responsibility

Fixed Price

Fixed Scope

Fixed Schedule

Usually the funding responsibility of the Project is with Customer

From an Offshore Perspective:

Technical Capability

Experience

Risk Appetite


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The Clientele

Oil and Natural Gas Corporation Limited:

Largest E&P Company operating in India, owns 95% of assets inthe region

Over 130 Well platforms and 38 Process Platforms

Reliance Industries:

First deepwater asset in India, East Coast

British Gas India: Operate mainly in western Offshore

Cairn Energy:

Offshore/Onshore Upstream

GSPC:

New entrant, enterprise of Gujarat Govt.

Other Private Companies: HOEC, Niko

New Players in Offshore explorations: HPCL, GAIL


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Business Prospects and Trends

Over 8 billion USD (Rs. 35,000 Cr.) of Investment in

Conventional Offshore Projects expected in India over thenext 5 years

Types of investments:

Development of Marginal fields Revamp and Turnaround Projects

Pipeline Projects (Replacement and Greenfield)

New Field Development

Large value Tenders from ONGC becoming more common

Initiative through NELP will further bolster Capex in Upstream.


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New Exploration and Licensing Policy

NELP: formulated by the

GoI in 1997-98 to provide alevel playing field, on which

all parties would compete,

for the award of exploration

acreage.

Since then , this policy has

well evolved and six rounds

have been completed

More than 70% of Offshore

blocks in NELP VI are in

Deep Water


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Larsen & Toubro Limited CALDMarketing & Business Development

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Competition

The Old Biggies Global EPC Companies:

J Ray McDermott, Saipem, Technip, Hyundai

Companies from the Middle East:

NPCC, IOEC

Indian Companies:

Punj Lloyd, EIL

Other New World Companies:

Samsung, Clough Offshore, Sime Darby, Naftogaz, Leighton


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Strengths and Challenges

Our USPs:

Strategic Location of MFF, Hazira Yard at OmanFunctioning from April 2007

Good Track Record of Projects in recent past

Extensive Experience with ONGC, familiarity and acceptance toTerms and Conditions

Price Preference and In-bond manufacturing Better grasp of Local Laws and Taxation methods

Areas of Growth and improvement:

Increase in-house content in Projects

Convert Capacity Constraint as an opportunity to expand

Develop Installation Capabilities

Enter new areas e.g. Oil Field Services


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Bidding cycle

Pre-qualification

Purchase of Tender Documents Technical Evaluation of Tender followed by queries

Contractual Evaluation of Tender followed by queries

Pre-bid conference with Customer

Develop Bidding Strategy in terms of Partnering, Consortium

Proposal Engineering, Estimation, MTOs etc Floating RFQs and Costing

Pricing and Bid Submission

Techno-contractual Bid Opening

Evaluation by Client

Price opening of qualified Bids

Award of Contract


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Marketing Functions

Tendering of Bids: Bidding strategy, Schedule and execution Methodology

Contractual study Comprehensive Pre-bid Risk Analysis

Pricing and Margins

Coordinate with Internal and External agencies for all biddingactivities

Developing and maintaining relationship with Customers Keep a close watch on the Market to understand Spends andTrends of Customers

Real-time competition study to pre-empt their moves

Look for possible and viable partnerships

Pre-qualify with new Clients or for new Jobs Monitor the Progress of other Ongoing Projects

Set sales target and order booking during SBU Budgeting

Participate in various forums to exhibit L&Ts capabilities in theSector

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The EPC Contract

The Contract is the most important document and forms the

basis to any Project undertaken Contains the exhaustive Terms and Conditions that require

the parties involved to abide by under various Project

circumstances.

Some of the key terms and conditions are:

Bid Bond requirement

Performance Bank Guarantee

Liquidated Damages

Payment terms and Milestone formula

Currencies and Taxation

Force Majeure

Consortium

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Key Contractual Aspects

Bid Bond:

Issued by Bank Value Rs. 2 Cr.

Validity: 120 days from Date of Bid Submission

Solvency Certificate: Measure of financial condition, issued by Bank

30% of Annualized Contract value as a minimum for solvency

Performance Bank Guarantee: Issued by Bank

5% of Contract value, valid up to Project Completion date + 60days

5% of Contract value, valid up to Project Completion date +Warranty Period +60 days

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Key Contractual Aspects

Liquidated Damages:

Recovery of 0.5% of Contract value per week of delay or pro ratafor part thereof, subject to a maximum of 10%

Force Majeure: Enlists cases under which either party can terminate the

Contract without being liable to any terms and conditions, under

circumstances beyond the Control

Payment Terms: Milestone based payments, important from a working capital

point of view

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Business Development

Program Lakshya Strategic Plan: Lays down growth targets and plans for the SBU

Upstream cluster targets to achieve a annual turnover of USD 1Billion by 2009-2010.

Identify newer areas of growth in line with the vision, missionand ethos of the Company

New Initiatives: Installation JV Oman Yard JV

Deep Water foray

FPSO & Rigs

Other possible M&As

Currently, OGSP contributes to more than 10% of the L&TTurnover and is all set to grow even more. Highest Turnoverper employee

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Best wishesThank you!!